By analyzing existing cross correlation between Facebook and Hamilton Beach Brands you can compare the effects of market volatilities on Facebook and Hamilton Beach and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Facebook with a short position of Hamilton Beach. Check out your portfolio center. Please also check ongoing floating volatility patterns of Facebook and Hamilton Beach.

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Can any of the company-specific risk be diversified away by investing in both Facebook and Hamilton Beach at the same time? Although using correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combing Facebook and Hamilton Beach into the same portfolio which is an essential part of fundamental portfolio management process.

Diversification Opportunities for Facebook and Hamilton Beach

0.55

Correlation

Very weak diversification

The 3 months correlation between Facebook and Hamilton is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Facebook Inc and Hamilton Beach Brands Holding in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Beach Brands and Facebook is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Facebook are associated (or correlated) with Hamilton Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Beach Brands has no effect on the direction of Facebook i.e. Facebook and Hamilton Beach go up and down completely randomly.

Pair Corralation between Facebook and Hamilton Beach

Allowing for the 30-days total investment horizon, Facebook is expected to generate 0.46 times more return on investment than Hamilton Beach. However, Facebook is 2.17 times less risky than Hamilton Beach. It trades about 0.14 of its potential returns per unit of risk. Hamilton Beach Brands is currently generating about 0.05 per unit of risk. If you would invest 16,950 in Facebook on May 7, 2020 and sell it today you would earn a total of 6,127 from holding Facebook or generate 36.15% return on investment over 30 days.

Facebook Inc vs. Hamilton Beach Brands Holding

Facebook Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Facebook are ranked lower than 9 (%) of all global equities and portfolios over the last 30 days. Despite somewhat weak basic indicators, Facebook sustained solid returns over the last few months and may actually be approaching a breakup point.

Hamilton Beach Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Beach Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 30 days. Despite somewhat sluggish basic indicators, Hamilton Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

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